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One Year On from the Food Crisis

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Josette Sheeran delivered the following speech as the Keynote Address at the DFID Annual Conference on March 10, 2009 in London.

I want to thank you Douglas for organizing this timely and strategic conference. I also
want to commend you for what must be one of the best background papers that I have
seen. Your themes strike tones of urgency and warning, and tones of confidence and
hope. I think both are right. And you properly explore the link between the world's most
vulnerable and the three F's - the food, fuel and financial crises - and the real and
potential impacts and responses.

Food security is, of course, non-negotiable. If neglected, we face catastrophe. History
shows that without adequate access to food, people migrate, nations can fall and millions
can die. We must not only produce more food, but protect those that are denied access to
it.

I would like to emphasize four points:

1. This battle is winnable;

2. We are not out of the woods;

3. We must fully utilize the mitigating structures created after the Great Depression
and World War II to help the world weather such storms - the World Bank, IMF
and UN agencies such as WFP;

4. We must simultaneously unleash a paradigm change in our approach to food
security and hunger and new perils, such as climate change.

We truly must remember that we can do this - today the world is nourishing more people
than ever before in human history. Ending hunger and malnutrition is not rocket science
- it requires no new huge scientific breakthroughs. Between 1969 and 2004 we cut the
proportion of hunger by half. Most recently, nations such as China, Brazil, Ghana,
Malawi, Vietnam, Thailand and many others have been making serious gains against
hunger.

In fact, less than 20 years ago China was WFP's biggest program. Today we provide no
food aid to China. These nations follow the success of Europe and Japan in beating
hunger after World War II, and many nations, such as Ireland, which only broke the cycle
of famine, hunger and agricultural impoverishment a few generations ago.

Unfortunately, the three F's - the food, fuel and financial crises - have gravely set us
back, leaving us with the three U's - food security that is unstable, unsustainable and
unequal. The new face of hunger is one driven not only by poverty, discrimination or
local crop failure and natural disasters, but by global economic factors.

International Development Secretary Douglas Alexander recently pointed out that these
crises have "been an object lesson in the extent in which we are all in this together and
we now live in an interdependent world."

I agree, and will tell a brief story to underscore this point: last year, at the height of the
high food price crisis, I visited with a food trader in Addis Ababa, Ethiopia. His creaky
wooden stall was filled with burlap sacks of teff - which he called white gold because of
its record price - and other grains and his donkey. When I asked him how he set his
prices he said, "I go on the Internet every morning and check prices on the Chicago board
of trade. I use those prices, but discount them 10 percent since we are poorer here."

We now live in a world where even humanitarian disasters such as hunger can be
globalized - riding in to remote villages on high prices, or now, with the global economic
slowdown, riding in to remote villages on the loss of income from remittances, or sharply
decreased exports or a drying up of foreign direct investment. To the bottom billion it is a
double whammy - food prices are already out of reach, and then their meager income
takes a hit.

In short, we have gotten ourselves in a pickle.

The silent tsunami of the most aggressive pattern of food commodity price increases on
record left devastation in its path. A year later we know how that story turned out.

Heroic, innovative and generous efforts by many, including bold action by the UK and
DFID which greatly increased assistance, prevented the worst form of suffering for more
than 100 million urgently hungry people. And yet hunger relentlessly marched on, adding
an additional 115 million people to its ranks in just the last two years. Today, nearly one
billion, or one in six people go to bed hungry.

The price storm also triggered a wave of negative market behaviors. More than 30
nations blocked exports of food. Many nations instituted price controls that pushed food
onto black markets and led to decreased agricultural investment. Nations and individuals
hoarded, speculators triggered price fluctuations and food contracts were routinely
broken as sellers sought better deals. WFP alone routinely had contracts for humanitarian
food broken as sellers could earn much higher prices from new buyers just days later.

And we are not out of the woods. While global food prices have fallen off from their
highs early last year, cereals are still 71 percent higher than they were in 2005. And in
many developing nations, local market prices, driven in part by short supply, continue to
ramp up. For example maize prices in Malawi are up 100 percent year over year, and
wheat prices in Afghanistan are 60 percent higher year over year.

Weather is also not on our side. Prices are expected to climb again due to poor weather
patterns. For example, in China and Argentina, severe drought has reduced the winter
wheat crop by almost half. New Zealand, Australia, and India and the State of California
also report serious droughts.

Crop disease is also an emerging threat with an especially virulent wheat stem rust
epidemic already seen in Uganda and Iran with more than six countries on high alert.
Green Revolution father Norman Borlaug, who led the world in defeating the latest
outbreak wheat stem rust epidemic in the 1950s, warned that this has "immense
destructive potential."

Unfortunately all signs point to the fact that last year's food crisis is far from over. A new
study from Chatham House warns of the coming "global food crunch." The long term
drivers of high prices such as climate change, scarcity of land and water, lack of
investment in agriculture and fuel production as well as rising rates of food consumption
due to population growth seem poised to continue.

We are also seeing nations again shutting down food exports as many have just done in
West Africa to ward off food inflation and protect supply. This is five months before they
shut down exports last year during the lean season. Last year less than 7 percent of global
rice was even traded. Others are trying to rebuild depleted stocks; there is again the
specter of hoarding.

And this year we have a new issue - in an editorial last month entitled "Barter Beware",
the Financial Times warns that many nations are entering into a "secret web of barter
deals as a substitute for global commodity markets" because financing for the
international food trade is drying up or becoming too expensive. Some report they cannot
get lines of credit to buy food for their nations.

Once again we must ask ourselves if we are witnessing a fundamental breakdown in
some aspects of the global food markets.

U.S. President Barack Obama's new Director of National Intelligence, retired Admiral
Blair, told the United States Senate a few weeks ago that the global economic crisis and
its geopolitical implications is now the primary near-term security concern - topping
terrorism or nuclear proliferation. I do not think his concern is ill-placed.

And as Prime Minister Gordon Brown said just last week in Washington: "our society
cannot be truly strong when millions are left so weak and this much we know, when the
strong help the weak it makes us all stronger."

So what are our priority areas for action?

Leaders must lead. Food security is an issue for Prime Ministers, Presidents, Kings and
Queens. The G-8, the G-20, the African Union, APEC, the Secretary-General's High
Level Task Force must keep both the issues of food production and food access as key
pillars in all work and must ensure they are a funding priority.

We must keep a bridge over troubled waters. We must not let down our guard on
emergency action.

Last year, thanks to the enormous generosity of many nations, WFP ramped up to reach
100 million people in need, helping more than 80 nations cool down food instability and
helping prevent massive suffering. Many other institutions - including Oxfam, Concern,
MSF, CARITAS, ICRC - also reached many millions. I must also commend the thought
leaders from AGRA, ODI and Simon Maxell, IFPRI and Joachim von Braun, Lawrence
Haddad, the Secretary-General's High Level Task Force including FAO, IFAD and
others.

And this was not your grandmother's food aid - 80 percent of our cash for food was spent
in the developing world, helping poor farmers break the cycle of hunger at its root.
And where the hunger was not caused by a lack of food, but because food was priced out
of reach, we deployed innovative cash and voucher systems. For example, in Burkina
Faso our emergency operation to address high food prices is targeting 180,000 people
with a voucher that can be redeemed in local stores for maize, cooking oil, sugar, salt or
soap. Among the people being served, 36,000 are children between the ages of 6 to 24
months old, who will receive a highly nutritious supplementary food called "Plumpy
Doz." This is a win-win venture that leverages the aid dollar to also help the local
economy directly - shops accepting the vouchers are located in the poorest
neighborhoods and are very happy to see their business resuming.

We must prioritize and target those nations, farmers and those individuals most in need.
On the input side, FAO, Jeffrey Sachs, the World Bank and others have identified priority
nations for interventions.

On the hunger front, WFP has created over several months what we call the Economic
Shock and Hunger Index (ESHI), to identify the most vulnerable nations in the inter-play
between the food and financial crisis and its effect on national vulnerability. The vulnerability indicators, independently reviewed and vetted, include:

- High levels of remittances

- Heavy reliance on trade

- High foreign direct investment

- Currencies sharply weakened against major currencies

- High current account deficits

- High dependence on official development assistance

Then we added a screen to look at food security by viewing:

-Per capita income under US$8,000 per year

-Nations with a food deficit

-More than 20 percent of the population is undernourished

-More than 20 percent of children under five are underweight

There were some surprises on our list of the 40 most vulnerable. For example, 27 percent
of Kyrgyzstan's GDP is made up of remittances. The dramatic slowdown of those
remittances has thrown 600,000 into urgent hunger. The government has requested WFP
to come back for the first time since 1992.

We must get the biggest bang for the food buck. At WFP we are asking, not only is the
cup full, but what is in the cup? How can it be, in this day and age when we know -
absolutely know - what causes stunting and brain damage in children, that we still have
epidemic proportions of stunting and severe malnutrition? Today, according to The
Lancet, one-third of children under five in the world are stunted. A new study jointly
released two weeks ago by WFP and the Swaminathan Research Foundation revealed that
40 percent of children below three in rural India are way behind adequate growth.
In fact, we know a child dies every five seconds from malnutrition and 60 percent of
child mortality deaths in the developing world are from malnutrition. It is almost criminal
that we - all of us - don't act with boldness and purposefulness to end this scourge.

Today WFP is transforming the way we do business, deploying ready-to-use foods such
as this locally produced baby food in India and date bars in Gaza. But we must expand
our reach to ensure universal fortification of basic commodities. Given the cost of
malnutrition to GDPs - our studies show a 6 percent reduction in GDP - it is cheap at
that price.

We must ramp up targeted safety nets, such as school feeding, or the productive safety
net in Ethiopia that has kept 7.5 million people off of emergency food aid. This is urgent
as many nations have hit the wall on their ability to afford overall food subsidies. This is
an explosive issue, and one that must be addressed to help ensure the stabilities of many
fledging democracies.

We must work on security of supply. Last year we saw record harvests in many nations,
but a break down in global markets. Nations such as the Philippines, Liberia or Ethiopia
had severe trouble purchasing enough food, even if they had the cash, as more than 30
nations restricted food exports. WFP also had extreme difficulty securing adequate
purchases.

There are three short term aspects to this:

First, the world must call in all fora for an immediate ban to export restrictions on
humanitarian food.

Second, next month, WFP will be unveiling a Global Advance Purchase Financial
Mechanism, already in pilot phase, which will allow us to pre-buy and secure supply and
pre-position food on a large scale for the first time in our history, saving money and
allowing us to work with - not against - markets.

As Paul Collier said just this morning, WFP is the world's insurance policy, and WFP
needs an insurance policy. This will be a historic humanitarian reform, which is being
modeled in partnership with the World Bank, getting WFP out of panic-buying and
positioning, and out of the risk of massive pipeline breaks when markets fail. We will
soon be talking with nations to provide seed capital to this fund, which should be self-
funding.

And third, we must consider calls by Chatham House, IFPRI, FAO and nations
themselves for a pre-positioning of actual or virtual stocks, to calm market nerves and
help prevent hoarding and panic buying. This can also help give nations assurance of
adequate supply. As one Minister of Agriculture told me, many nations now have "the
jitters." WFP currently helps more than 20 nations procure and manage emergency
stocks. We have created a task force, tapping into the best minds in this area, to advise us
on whether WFP can or should play a more significant role in this area.

Of course, security of supply is also dependent on adequate production. We know the
world must produce twice as much food by 2050. This is in face of scarcity factors such
as climate change and water shortages. After the 1974 food crisis, and the United States'
decision to restrict soybean exports, there was a flood of investment into Brazil and
Argentina in efforts to secure alternative supply.

Today we see such a gold rush into Africa, with billions of investment going into
cultivating land, most of it for export. It would turn this food crisis into a huge
opportunity if those investments can be structured as a mutual win - local communities
win through investments in infrastructure and through reaping a portion of the harvest to
market locally.

Even as we meet emergency needs, we must build an anti-famine mechanism for the 21st
Century - one that enacts bold reforms and partnerships to ensure adequate access to food
for all. I will speak more on this tonight at Chatham House.

I would like to end with a pop quiz - this is a test to make sure you are awake. This is
interactive. I am going to quote someone famous who has said all I want to say, but in
words that are better than mine. See if anyone can guess who said this - and when:
The threat of famine, the fact of hunger have haunted men and nations throughout
history.....This eternal problem has now taken on unprecedented scale and
urgency and...can only be dealt with by concerted worldwide action.

Our challenge goes far deeper than one area of human endeavor....We are faced
not just with the problem of food but with the accelerating momentum of our
interdependence.....In the past thirty years the world came to assume that a stable
economic system and spreading prosperity would continue indefinitely.

Now there are fundamental questions about our capacity to meet even our most
basic needs....Partly due to bad weather around the globe, world grain production
declined for the first time in two decades. We [are] made ominously conscious of
the thin edge between hope and hunger, and of the world's dependence on the
surplus production of a few nations.

The contemporary agenda of energy, food and inflation exceeds the capacity of
any single government, or even a few governments together, to resolve. All
nations...are linked to a single economic system. Preoccupation with narrow
advantage is foredoomed.....The poorest and the weakest nations will suffer most.
Discontent and instabilities will be magnified in all countries. New dangers will
be posed to recent progress in reducing international tensions.

This need not be our future. There is great opportunity as well as grave danger in
the [current] crisis.

We must begin here with the challenge of food. No social system, ideology or
principle of justice can tolerate a world in which the spiritual and physical
potential of hundreds of millions is stunted from elemental hunger or inadequate
nutrition. National pride or regional suspicions lose any moral or practical
justification if they prevent us from overcoming this scourge.

In short, we are convinced the world faces a challenge new in its severity, its
pervasiveness, and its global dimension.....Let us agree that the scale and severity
of the task require a collaborative effort unprecedented in history.

And let us make global cooperation in food a model for our response to other
challenges of an interdependent world - energy, inflation, population, protection
of the environment.

Any guesses? Was it the UN Secretary-General? The head of the UN Food and
Agriculture Organization? Or, perhaps, someone from the Red Cross?
In fact, it was U.S. Secretary of State Henry Kissinger, speaking at the United Nations
World Food Conference in 1974.

As it has been said, history may not repeat itself, but it sometimes rhymes. Let us not
miss the opportunity this time around to end the devastating and destabilizing scourge of
hunger and malnutrition once and for all.

Thank you.

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